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A theorethical example of a private equity fund's cash flows

Basic assumptions about the example fund

The fund's size is €100 million.
The fund makes 10 investments, each of €10 million, at 6-month intervals. The first investment is made 6 months after the fund’s establishment.
The value of each investment grows by a factor of 2.5 over a 5-year holding period.
The fund’s management fee (2% p.a.) is based on the fund’s size (€100 million) during the investment period (e.g. 4.5 years), and thereafter on the remaining portfolio at acquisition cost.
The fund’s hurdle rate is 8%. The combined share of the management company and the investment team responsible for the fund's investment operations of carried interest is 20%. The management company and the investment team share the carried interest equally (50%-50% split).

Based on these assumptions

The fund's gross multiple is 2.5.
Net multiple to investors is 2.08.
Net IRR to investors is 19.2% p.a.
The fund transfers to carry in its seventh year.
Carried interest received by the management company and the investment team responsible for the fund's investments amounts to €27.1 million. Of this, the management company receives €13.5 million and the investment team €15.5 million.
Management fees received by the management company amount to €14.6 million.

Cumulative cash flows during a fund's life cycle

A theorethical example of a private equity fund's cash flows

Investment teams

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